The annual RIO Country Report offers an analysis of the R&I system in Ireland including relevant policies and funding, with particular focus on topics critical for EU policies. The report identifies the main challenges of the Irish research and innovation system and assesses the policy response.
Ireland performs relatively well in terms of innovation outputs, both in the Innovation Output Indicator and on the Innovation Union Scoreboard. This is mainly due to its economic structure, geared towards several high-tech manufacturing sectors and knowledge-intensive services.
However, research and development activity is largely carried out by foreign multinationals and there have been limited spillovers to SMEs.
Statistics published by the Central Statistics Office show that expenditure on R&D by the enterprise sector is dominated by MNCs: 400 companies accounted for 65% of total R&D expenditure in 2013.
Indigenous SMEs show also slightly lower levels of formal collaborations with HEIs compared to foreign-owned businesses (see also Challenge 3): 19% of Irish-owned R&D performing enterprises collaborate with HEIs or other institutions in Ireland and 7% with HEIs or other institutions outside Ireland, whereas these percentages are 21% and 10% respectively for foreign-owned R&D performing firms.
The evidence also points to the fact that most R&D expenditure in Irish-owned firms, 72%, is being carried out in sectors that are not significant exporters.
The background report to the 10-year enterprise and jobs strategy, Enterprise 2025 published in November 2015 notes that despite the fact that there has been an increase in the number of enterprises engaging in RD&I, the reality remains that there is a high proportion of Irish-owned enterprises across the economy that do not undertake any RD&I activities. It says that even in cases of indigenous enterprises that are engaged, the levels of investment in innovation remain low. The background report also states that progress towards targets set out in the Strategy for Science, Technology and Innovation 2006-2013 in terms of the numbers of indigenous companies with minimum and significant scale R&D expenditure was slower than envisaged.
The Enterprise 2025 background report points out that a high proportion of Irish owned enterprises are small, and the challenges facing them are similar to those found in other countries — namely the lack of capacity to innovate and to absorb innovations.
The predominance of foreign companies in the Irish business R&D landscape has been acknowledged by the Government in its Medium Term Economic Strategy document, which notes that indigenous SMEs need to improve their innovation capacity.
Enterprise 2025 outlines a range of policy responses to addressing the challenges of increasing the numbers of indigenous enterprises engaged in RD&I activities and increasing RD&I expenditures by this cohort.
The main support measure for research-performing Irish businesses is the R&D tax credit, introduced in 2004, which provides a 25% credit on corporate tax for qualifying R&D expenditure.
A wide range of direct funding schemes are provided by Enterprise Ireland (EI) and Science Foundation Ireland (SFI), especially targeting the collaborative research projects between businesses and between businesses and academia (see Challenge 3).
Demand-side measures to foster the provision to the public sector of innovative products/services by Irish SMEs have been launched with the first SBIR call in 2014 (see Challenge 4).
Ireland took several policy measures through the years to increase the R&I capacity of indigenous firms, the most relevant in economic terms being the R&D tax credit, which has a cost in terms of foregone tax revenues estimated at €421m in 2013. However, official figures show the credit is used predominantly by multinational firms and other large employers in the high tech and manufacturing sectors
The Knowledge Development Box will be introduced in 2016 and has a similarly broad application for all types and sizes of firms.
Stakeholders have highlighted the need for State agencies to be constantly vigilant in ensuring that there are no major gaps in RD&I support funds. The Industry Research & Development Group (IRDG), a representative body for research performing organisations, recommended that the funding provided under the Innovation Voucher scheme (currently €5,000) could be extended to €20,000-50,000 so as to increase collaboration between companies and the higher education institutions. IRDG says this proposal would fill a funding gap between the current Innovation Voucher scheme and a research-based Innovation Partnership (both measures are offered by Enterprise Ireland, the enterprise development agency for Irish owned manufacturing and internationally traded service companies).
The large number of support schemes to businesses R&I should be rationalised, as also pointed out by the OECD in its 2013 Economic Survey of Ireland, which called for the consolidation of funding into a drastically smaller number of agencies, with one group dealing with science and basic research, and another with applied research and innovation. The IRDG in its submission to the Consultation Paper for Innovation 2020 noted that “companies can struggle to understand the funding structures in place for Research & Innovation across the various government bodies from Enterprise Ireland, Science Foundation Ireland, IDA Ireland, Irish Research Council, Revenue Commissioners, H2020, etc.”